The last year has been difficult for the Pru. Like most insurers, it suffered the fallout from the September 11 terror attacks, which marked the biggest insurance claim in history. This, coupled with the year’s exceptional stock market falls made for a financial roller coaster ride.

In July, Prudential was under rigorous scrutiny as falling equity markets eroded its asset base. But after interim results allayed fears about the insurer’s solvency, the outlook looked more positive.

Also, in its results for the year to June 30, Prudential said its free asset ratio – the measure of its ability to meet pension and policy payouts – was 11%, a level considered safe. It reported total insurance and investment sales up 36% to £13.7bn and profits up 16% on the previous year at £397m.

But the warning signs were already there. The slump in the markets coupled with write-offs of US bond investments caused operating profits to fall £110m, well below expectations.

As the stock markets continued to plunge, pressures on the life insurance giant to act defensively and make its first dividend cut since 1914 grew.

City analysts said a cut in the Pru’s ‘demanding’ dividend policy would help pay for growth, providing an easily available source of funding.

By December, Prudential had cut bonuses on long-term savings policies three times.

In September, the insurer succumbed, announcing a reduction in final bonus rates and payouts and, later in the month, removed its final salary scheme from new employees.

Chief executive Jonathan Bloomer insisted the policy was not due to financial weakness or because of the controversial pensions accounting standard FRS17 – but because the workforce was changing.

In February 2002, the company made 1,400 redundancies, as it scrapped its ‘Man from the Pru’ sales team. Then, in October, it cut a further 850 jobs and set up a customer call centre in India.

But it was not all bad news for Pru. Its choice of former deputy Bank of England governor – and chartered accountant – David Clementi as non-executive chairman pleased the City. And its online bank, Egg, performed well in the UK and France.

But, despite some positive signs, it doesn’t look like things will be any easier if the stock markets continue their downward spiral. And, with an ageing population, Prudential will also have to contend with the ‘time bomb’ of fewer young people to pay for a growing population of pensioners.